TIAA Traditional Annuity not Exempt from Reporting

March 16, 2010 ( – The U.S. Department of Labor has issued an Advisory Opinion saying the Traditional Annuity offered by TIAA-CREF is not a fully allocated contract within the meaning of the tax code, and thus not exempt from Form 5500 reporting.

The letter said the decision was based on the fact that upon receipt of each contribution or “premium,” TIAA-CREF does not unconditionally guarantee to provide a retirement benefit of a certain amount or a “specific dollar benefit” without adjustment for fluctuations in the market value of TIAA’s underlying assets, as required by Section 29 C.F.R. § 2520.104-44(b)(2) and explained in the 2008 Form 5500 instructions. A discussion of more specific reasons was included in the letter.  

The DoL acknowledged that the issue of whether the TIAA Traditional Annuity could be treated as an allocated contract for annual reporting purposes under Title I of ERISA was not entirely free from doubt and that, in reliance on its legal interpretation of the annual reporting requirements, TIAA-CREF issued guidance to its client plan administrators that “TIAA Traditional Annuities are fully allocated contracts and as a result any accumulations to these annuities are not required to be reported as plan assets on Form 5500.” The Department said it will not require the plan administrators of those plans that relied in good faith on TIAA-CREF’s guidance to file amended and corrected annual returns/reports.

In addition, the DoL said it will not reject a Form 5500 for 2008 and prior plan years on the basis of a “qualified,” “adverse,” or “disclaimed” auditor’s opinion if the reason for such a qualified or adverse opinion or disclaimer of opinion was because the TIAA Traditional Annuity was treated as an allocated insurance contract for purposes of the audit and the plan’s financial statements.

However, for plan years beginning on or after January 1, 2009, the letter said the TIAA Traditional Annuity must be reported on Schedules H or I as an unallocated insurance contract, and must be treated as an unallocated insurance contract for purposes of Schedule A or the plan financial audit.